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Lime Energy Co. Files 2012 Annual Report On Form 10-K And Quarterly Report On Form 10-Q For The Period Ended September 30, 2012

Lime Energy Co. (NASDAQ: LIME) today will file its Annual Report on Form
10-K for the year ended December 31, 2012 (the “10-K”), and its
Quarterly Report on Form 10-Q (the “10-Q”) for the period ended...

Lime Energy Co. (NASDAQ: LIME) today will file its Annual Report on Form 10-K for the year ended December 31, 2012 (the “10-K”), and its Quarterly Report on Form 10-Q (the “10-Q”) for the period ended September 30, 2012. The 10-K includes audited financial statements for the year ended December 31, 2012 and restated audited financial statements for the year ended December 31, 2011, as well as restated audited financial results for the years ended December 31, 2008, 2009 and 2010. The 10-Q includes unaudited financial statements for the three-month periods ended March 31, 2011 (restated) and 2012 (restated), the six-month period ended June 30, 2011 (restated), and 2012, and the nine-month period ended September 30, 2011 (restated), and 2012.

The restatement resulted in the reversal of approximately $14.2 million of revenue that was not supported by valid contracts. We also found approximately $17.4 million of cumulative revenue through March 31, 2012, that had been recognized earlier than appropriate. All but approximately $500 thousand of the revenue recognized early was adjusted and properly recognized by the end of 2012.

“Today Lime Energy took an important first step in becoming current with its financial reporting and we look forward to completing our other required filings,” said Lime’s President and Chief Executive Officer John O’Rourke.

Restatement Process Overview

Lime’s restatement process with respect to the 10-K and 10-Q included the following events and actions:

On July 13, 2012, Jeffrey Mistarz, Lime’s Chief Financial Officer, concluded that there was preliminary evidence suggesting that there had been misreporting of revenue from the Company’s utilities division and he and Mr. O’Rourke informed the chairman of the Audit Committee and the Company’s outside securities counsel regarding the findings.

On July 14, 2012, Messrs. O’Rourke and Mistarz informed the Company’s directors of the preliminary results of the internal review.

A meeting of the Audit Committee was held on Sunday, July 15, 2012. At that meeting, the Audit Committee determined that the Company’s consolidated financial statements on Form 10-K for the periods ended December 31, 2010, and December 31, 2011, and quarterly report on Form 10-Q for the period ended March 31, 2012, could no longer be relied upon.

On July 16, 2012, attorneys from the Company’s outside law firm began interviewing employees of the utilities division.

The Company issued a Form 8-K before the market opened on July 17, 2012, stating the determination of the Audit Committee regarding the 2010 through 2012 quarterly and annual financial statements.

On July 22, 2012, the Audit Committee met and established a subcommittee to conduct an independent investigation of the misreporting of revenue. The subcommittee retained its own independent counsel and forensic accountants.

The review led to the discovery of misreporting of revenues from the public sector division, including evidence suggesting that there had been misreporting of revenues in the years ended December 31, 2008 and 2009. On December 21, 2012, the Audit Committee determined that the Company’s financial statements for those years could no longer be relied on.

On December 28, 2012, the Company issued a Form 8-K stating the determination of the Audit Committee regarding the 2008 and 2009 financial statements.

Lime terminated employees identified as having been involved in the misreporting of revenue.

The independent investigation also concluded that Lime had deficiencies in its internal control over financial accounting. Consequently, Lime has revised its previous evaluation of the effectiveness of its disclosure controls and procedures as of December 31, 2008, 2009, 2010, 2011 and as of March 31 2012 and concluded that its disclosure controls and procedures were ineffective as of those dates because of material weaknesses in Lime’s internal control over financial reporting. In addition, Lime has concluded that its disclosure controls and procedures were ineffective as of June 30, September 30 and December 31, 2012 because of material weaknesses in Lime’s internal control over financial reporting.

Outcome of Restatement Process

Following the restatement process Lime has completed the following actions:

Instituted a remediation plan for its internal control over financial reporting

“Our employees are still with us and striving collectively to push the company forward, our major suppliers have stuck with us throughout the entire restatement process, and our clients continue to work with us and in some cases expand their existing engagements,” stated Mr. O’Rourke. “We had eight utility program clients coming into the process; we now have nine. This speaks volumes to the strength of the business solution we provide and the continuing confidence all of our stakeholders have in the future of the business.”